Do I need a written agreement to lend money to family in Scotland?
Scots law does not demand one, but having one is strongly advisable, as it evidences that the money was lent and sets down when and how repayment must be made.
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Private loan agreement (Scotland)
A private loan agreement documents money lent between individuals or businesses, setting out the sum, any interest, the dates for repayment, the consequences of default and any guarantee or security. Making loans to individuals as part of carrying on a business counts as regulated consumer credit, for which FCA authorisation is needed.
When you need one
Put one in place for any sizeable loan to relatives, friends or a business, so that you can show the money was lent rather than given and the repayment terms are clear.
What it should contain
Loan amount
The sum being lent and the date it is handed over.
Interest
Either the rate, expressed clearly as a yearly percentage, or confirmation that no interest is payable.
Repayment
Repayment by instalments, as a lump sum, or on demand.
Default
The consequences of a missed payment, including the entire outstanding balance falling due.
Security or guarantee
Any personal guarantee, or any charge over property.
Points specific to Scotland
- In Scotland, security over land is a standard security registered in the Land Register of Scotland, and a guarantee (a cautionary obligation) given other than in the course of business must be in writing under the Requirements of Writing (Scotland) Act 1995.
- The Moveable Transactions (Scotland) Act 2023 introduced a statutory pledge for security over moveable property.
Different rules can apply elsewhere in the UK: see the England and Wales version of this guide.
Common mistakes
- Lending to individuals in the course of business without being FCA authorised.
- Nothing in writing, so it is later claimed the loan was a gift.
- Accepting security but not finishing the steps needed for it to take effect.
View a specimen private loan agreement: a brief sample of the layout and core clauses, shown as the app generates them.
Quick answers
Is charging interest on a private loan legal in Scotland?
Yes. However, lending to individuals by way of business will probably count as regulated credit, needing FCA authorisation.
Draft your private loan agreement now
Be Contract Wise (Scotland)'s powerful, carefully prepared drafting tools turn a short set of plain-English questions into a private loan agreement under Scots law, laid out to a professional standard, with an explanation of every clause. Simple or complex, export to Word or PDF.
Start drafting — freeBrowse all guidesReviewed 2026-09-24. General legal information about Scots law, not legal advice.